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ADVERTISING: Budgeting to Achieve Specific Objectives

ADVERTISING: Budgeting to Achieve Specific Objectives. General Budget Strategies. Top Down Sales Goals Return on Investment Bottom up (Goal Based). 1. Top-Down Budgeting. The Promotion Budget Is Set to Stay Within the Spending Limit. Top Management Sets the Spending Limit.

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ADVERTISING: Budgeting to Achieve Specific Objectives

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  1. ADVERTISING:Budgeting to Achieve Specific Objectives

  2. General Budget Strategies • Top Down • Sales Goals • Return on Investment • Bottom up (Goal Based)

  3. 1. Top-Down Budgeting The Promotion Budget Is Set to Stay Within the Spending Limit Top Management Sets the Spending Limit

  4. 2. Sales Objectives Budget Product Quality Competition Promotion Price Policy SALES The Economy Distribution

  5. 3. Return on Investment Budget MARGINAL ANALYSIS IncreaseSpending . . . IF: The increased cost is less than the incremental (marginal) return. DecreaseSpending . . . IF: The increased cost is more than the incremental (marginal) return. HoldSpending Level. . . IF: The increased cost is equal to the incremental (marginal) return.

  6. Marginal Analysis: An Example Gross Margin Sales Ad. Expenditure $ Profit Point A Advertising / Promotion in $

  7. The Complication:Two Advertising Response Functions B. S-Shaped Response Curve A. Concave-Downward Response Curve Sales Middle Level High Effect Sales High Spending Little Effect Initial Spending Little Effect Range A Range B Range C Advertising Expenditures Advertising Expenditures

  8. Concave or S-shaped?

  9. Concave or S-shaped?

  10. 4. Bottom-Up Budget Total Budget Is Approved by Top Management Cost of Activities are Budgeted Activities to Achieve Objectives Are Planned Promotional Objectives Are Set

  11. Goal Based Budgeting: The DAGMAR Approach Define Advertising Goals for Measuring Advertising Results

  12. Communications Effects Pyramid 5% Use 20% Trial 25% Preference 40% Liking 70% Knowledge 90% Awareness Behavioral Affective Cognitive

  13. Alternative response strategies What would you budget for? Do Feel Learn Learn Do Feel

  14. Setting Objectives • Specific Communications Objectives • Concrete Measurable Tasks • Well-Defined Target Audience • Existing Benchmark Measure • Degree of Change Sought • Specific Time Period

  15. Video http://www.youtube.com/watch?v=XVNV5SpLjKk

  16. Activity • Evaluate the proposed campaign

  17. Suggested approach • 1. Determine involvement level • Which involvement hierarchy? • 2. Choose communication objectives (DAGMAR) • What should marketing communication DO? LATER STEPS: • 3. Select IMC channels • Which elements will allow you to achieve those? • 4. Estimate prices • How much will it cost to achieve those goals?

  18. Quote of the Day • American advertisers rely on essentially illogical approaches to determine their advertising budgets. • Michael Schudson (professor)

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